The National Asset Reconstruction Company (NARCL), better known as the bad bank, will soon recruit more directors for better corporate governance. This decision also aims to ensure fair representation of shareholders, sources close to informed developments.
Earlier this month, the Reserve Bank of India (RBI) licensed the ??6,000 crore NARCL led by public sector banks with a 51% stake in the entity. There would be shareholder representation on the side of private sector banks, which will hold 49%, sources said. In addition, India’s central bank has asked NARCL to submit full board details soon, sources added.
The Association of Indian Banks (IBA), responsible for setting up the bad bank, has established a preliminary board for NARCL. The company hired PM Nair, a stressed assets expert from the State Bank of India (SBI), as its managing director.
The other directors on the board are IBA CEO Mehta, SBI Deputy Managing Director SS Nair, and Canara Bank Managing Director Ajit Krishnan Nair.
In September, Cabinet approved a proposal to provide a government guarantee worth ??30,600 crore to security receipts issued by NARCL.
Shortly after Cabinet authorization; SBI, Union Bank of India and Indian Bank each took 13.27% stake in NARCL, while Punjab National Bank (PNB) acquired around 12% stake.
NARCL will pay up to 15 percent of the agreed value for bad debts in cash and the remaining 85 percent would be government guaranteed collateral receipts.
The defaulting bank will take over the identified bad loans from the lenders. The lead bank with an offer in the hands of NARCL will go for a âSwiss Challengeâ, in which other actors in the reconstruction of assets will be invited to improve the offer made by a chosen bidder to find a more valuation. high of a non-performing asset for sale.
The company will recover the assets that are 100 percent provided by the lenders. Banks have identified around 22 bad loans worth ??90,000 crore to be transferred to NARCL in the initial phase.
Finance Minister Nirmala Sitharaman said in the 2021-2022 budget that the high level of provisioning by public sector banks to their stressed assets calls for measures to clean up the bank books.
“A limited asset reconstruction company and an asset management company would be created to consolidate and take over the existing stressed debt,” she said in the budget speech.
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